Canadian Natural Resources Ltd. (CNRL) have announced they will continue operating their ECHO pipeline after the provincial government stated they would be increasing Alberta’s oil production.
“Following the Government of Alberta’s announcement of production limits easing for February and March 2019, Canadian Natural’s curtailment volume for February 2019 will be reduced. With this increase in allowable production, Canadian Natural will be able to maintain production at levels to safely operate the ECHO pipeline,” said CNRL spokesperson Julie Woo in an email.
According to Woo, the decision will protect up to 2,400 jobs for contractors and service providers in the Lakeland.
While CNRL never confirmed if they would be shutting down the ECHO pipeline, Bonnyville-Cold Lake MLA Scott Cyr noted the job loss would have been “tragic for our area.”
“This is a time where we’ve already taken a significant roll back in wages. We’ve seen lost hours, and a lot of our family members aren’t working. We couldn’t absorb it, and the fact that the province needed to react this quickly shows how little they prepared for the repercussions of their decision,” he stressed.
Concerns were raised when the province announced that starting Feb. 1 they would be using a company’s highest level of production during their best month from November 2017 to October 2018 as a baseline for production activity. This was a change from the original formula, which saw the baseline established by a company’s highest six-month average over the same period.
The curtailment was created as a way of reducing the amount of oil being held in storage, resulting in the resource being given away for cheap.
“It was something that was necessary and it did have the desired affect almost immediately. You saw the Western Canada Select, the price went up almost overnight, and it continued to go up to a reasonable level... The storage volumes went down, which is also part and parcel of the goal,” said Town of Bonnyville Mayor Gene Sobolewski.
Storage levels in Alberta have dropped since the production limit was announced by about five million barrels. The Alberta government stated the storage levels are continuing to dip by roughly one million barrels per week, and are on track to continue clearing the storage excess that led to the unprecedented discount on Alberta oil later this year.
Premier Rachel Notley said on Wednesday, Jan. 30 the limit on oil production would be increased in February and March by 75,000 barrels. This would bring the limit for oil companies to 3.63 million barrels per day.
“We’re not out of the woods yet, but this temporary measure is working,” Notley said in a press release. “While it hasn’t been easy, companies big and small have stepped up to help us work through this short-term crisis while we work on longer-term solutions, like our investment in rail and our continued fight for pipelines.”
While he sees the announcement as a step in the right direction, MD of Bonnyville Reeve Greg Sawchuk believes the same issue is inevitable.
“It still comes back to our big problem is even if you ease the curtailment now, eventually we’re going to be back up to the same storage problem. We’ll have too much sitting there, and the price will drop. Until we get that extra route out of here for oil, we’re going to find ourselves back in the same situation,” he explained.
City of Cold Lake Mayor Craig Copeland agreed, but thinks there shouldn’t be a curtailment placed on the oil industry at all.
“I hope that we go back to zero, and not have government influence on the oil markets. The government’s job is to develop policy, write regulations, and not interfere with the commodity price. Let the people that produce the product determine the supply of the product,” he stressed.
Similar to Copeland, Imperial Oil doesn’t feel the government should have placed a curtailment on the industry.
“We think healthy free markets are most effective and efficient when there is stability. We continue to work with the Government of Alberta to recommend potential solutions to minimize negative consequences,” detailed spokesperson for Imperial Oil Lisa Schmidt in a email.
While CNRL agrees with the government’s decision to protect the value of Canada’s resources, Woo said that it should only be done “provided that curtailments are implemented in an equitable, transparent, and reasonable manner.”
